NEW YORK (CNNMoney.com) -- Stocks rallied Friday, with the Dow industrials closing up 494 points after reports surfaced that President-elect Barack Obama will nominate New York Federal Bank President Timothy Geithner as his new Treasury secretary.

The Dow Jones industrial average (INDU) rose 494 points, the fifth-biggest single-session point gain ever, according to Dow Jones. The daily gain of 6.5% was not a record.

Stocks rallied in the morning on reports that troubled Citigroup (C, Fortune 500) might put itself up for sale. But the company's CEO shot down the rumors in a call with senior managers, sending Citi's shares and the broader market lower.

But the market managed to snap back in the last hour of trading as reports about the president-elect's cabinet appointment circulated. The Dow had been down around 32 points as of 3:00 p.m. ET and spiked as much as 519 points after the reports began to circulate.

Stocks had also been primed for a snap anyway, after the S&P 500 ended the previous session at an 11-1/2-year low and the CBOE Volatility index ended at an all-time closing high.

"It was the combination of the market being oversold and the Geithner report," said Donald Selkin, chief market strategist at National Securities.

However, Selkin noted that the market has been technically "oversold" for quite some time and that it could have remained oversold today had the reports not started circulating.

In particular, Wall Street seemed to welcome Obama's reported pick of Geithner, the vice chairman of the Federal Reserve's policy-setting committee. Geithner was the Fed's point person on the rescue of Bear Stearns and AIG. Selkin said that investors are betting that he might help broker a deal this weekend to save Citigroup too.

"It's not just that Wall Street likes Geithner, it's that there's relief that the incoming administration is taking some concrete steps to deal with the crisis," Selkin said.

Looking forward, stocks aren't likely to see a lasting rally, with the markets continuing to be driven by the day-to-day news, said Ron Kiddoo, chief investment officer at Cozad Asset Management.

"Maybe if we start to hear that Christmas isn't going to be quite as terrible as everyone thinks or if we get some other shred of less negative news, we can see a small advance," he said. "But at this point, I just don't see the catalyst."

The Dow lost 10.4% in Wednesday's and Thursday's sessions, its worst two-day percentage drop in over 20 years, according to Dow Jones.

For the week, the Dow lost 5.3%, the Nasdaq lost around 8.5% and the S&P lost 8%.

Banks: Citigroup had led the financial sector lower through most of the session, before the 3:00 p.m. turnaround. Although many of the stocks recovered by the close, Citigroup remained in the red, posting losses of 20% on top of the 26% it posted Thursday.

The bank sector and the credit market had seen some improvement in late October and early November amid a series of steps by the government to make cash more available. But that trend has reversed itself of late, particularly since the Treasury said it will no longer buy banks' bad mortgage debt through the $700 billion bailout, as it originally planned.

Auto sector: Investors also contended with the albatross of the automakers, with an auto sector bailout all but dead. The top executives of the Big Three automakers told Congress this week that they need a $25 billion loan to stay in business.

Some critics think the companies would be better served by declaring bankruptcy and restructuring. However, such a move would still bring job losses and more strain on the already struggling economy.

Congress has pledged to return next month to reconsider the bid if the automakers can come up with a "viable" recovery plan. GM (GM, Fortune 500) and Ford (F, Fortune 500) shares managed slim gains Friday, rising with the rest of the market.

Other company news: After the close Thursday, Dell (DELL, Fortune 500) reported weaker earnings that topped estimates and weaker revenue that missed estimates. The stock ended little changed.

Gap (GPS, Fortune 500) was one of the session's bright spots. After the close Thursday, the apparel retailer reported higher earnings that topped analysts' estimates on weaker revenue that missed estimates. Shares gained over 27% Friday.

Wal-Mart (WMT, Fortune 500) rallied after it named a new chief executive to replace its retiring CEO.

Other markets: Global markets were mixed, with Asian stocks ending higher and European markets ending lower.

U.S. light crude oil for January delivery rose 51 cents to settle at $49.93 a barrel on the New York Mercantile Exchange, in the first day of trading for the new contract.

COMEX gold for December delivery rallied $43.10 to settle at $791.80 an ounce.

For the first time in 3-1/2 years, gasoline prices fell below $2 a gallon, losing 3.1 cents to a national average of $1.989 a gallon, according to a survey of credit-card activity released Friday by AAA. Prices have been dropping for over two months. In that time, prices have lost $1.84 a gallon, or over 52%.

Bonds:Treasury yields bounced back Friday after the 2-year, 10-year and 30-year government bonds all finished the previous session at the lowest levels since the Federal Reserve started keeping records in 1962.

The yield on the 3-month Treasury bill hung close to 68-year lows of zero, versus a yield of 0.01% Thursday. The 3-month - seen as the safest place to put money in the short term - last hit these levels in September as investor panic peaked. The low yield means nervous investors would rather preserve their money despite no interest rather than risk the stock market.

Borrowing rates worsened a bit. The 3-month Libor rate rose to 2.16% from 2.15% Thursday, while overnight Libor rose to 0.47% from 0.44% Thursday, according to Bloomberg.com. Libor is a key bank lending rate.